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U.S. Stocks Climb to Start the Month

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08/03/2020 | 04:22pm EDT

By Alexander Osipovich and Anna Isaac

U.S. stocks rose on Monday, lifted by a surge in technology stocks like Apple and Microsoft, as well as signs that the rate of new coronavirus infections could be slowing.

The Dow Jones Industrial Average gained 236 points, or 0.9%, as of the close of trading in New York, getting August off to a strong start. The index climbed 2.4% in July. Trading volumes are expected to slide in coming weeks with the onset of the summer vacation season, leading to a potential increase in volatility.

The S&P 500 rose 0.7%, while the tech-heavy Nasdaq Composite climbed 1.5%, giving the benchmark a fresh record.

Investors have piled into technology stocks in recent weeks, particularly companies that seem to benefit from stay-at-home orders. Robust earnings from tech companies and virus-fueled disruptions to traditional sectors, like airlines, retail and manufacturing, have widened the gap between Big Tech and everyone else.

"We expect to see that bifurcation in the market until we get some sort of solution for how to move past the virus issue," said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Apple shares gained 2.5% on Monday. Microsoft shares climbed 5.6%, a record close, after the software giant said over the weekend that it would move forward with plans to buy the U.S. operations of the hit video-sharing app TikTok. The companies' gains helped make tech stocks the best-performing sector of the S&P 500 on Monday.

Meanwhile, the U.S. registered its lowest number of new Covid-19 infections in weeks, spurring investors' hopes that the growth in cases could be slowing. The U.S. reported more than 47,000 new coronavirus cases, the smallest daily increase in almost four weeks, after posting a record number of new infections in the month of July.

"A couple of weeks ago, U.S. cases were rising by 40-50% on a weekly basis. They're now falling. Not as fast as they might appear, because testing has dropped, but they are still lower and so is the rate of hospitalization. Markets like that," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

New data showed U.S. manufacturing activity grew in July, a sign that the sector is recovering after the Covid-19 pandemic forced much of the U.S. economy to an abrupt halt. The Institute for Supply Management's manufacturing index rose to 54.2 last month, from 52.6 in June. Economists had expected the reading to come in at 53.8. Anything above 50 represents an expansion in activity.

Overseas stocks rose after similar data pointed to a manufacturing recovery. The pan-continental Stoxx Europe 600 rose 2.1%, its biggest gain in more than a month, bolstered by survey data showing signs of recovery in euro area factories. In China, the Shanghai Composite Index rose 1.8% after a private gauge of manufacturing activity on the mainland rose in July to its highest level in more than nine years.

Investors were watching whether political leaders in Washington would overcome a partisan divide and deliver further fiscal support for the American economy. Democratic leaders and White House officials planned to meet on Monday to discuss a new economic relief package, including aid to replace the federal $600-a-week boost to unemployment benefits that expired Friday. The White House had hoped to pass a short-term extension of the federal unemployment insurance, but Democrats want to negotiate a comprehensive package of relief, including state and local aid.

"The slowness with which Washington is coming to an agreement on a fiscal policy shows some fatigue. A deal will likely come, but after some big fiscal cliffs have been passed," said James McCormick, a strategist at NatWest Markets.

Earlier, shares of ADT soared about 64% after the security company said Google would invest $450 million to acquire 6.6% ownership in ADT, and the companies entered into a long-term partnership to create smart home security offerings.

Marathon Petroleum shares rose 1.3% after the oil refiner said it had agreed to sell its gas stations to the owners of the 7-Eleven convenience store chain for $21 billion in the largest U.S. energy-related deal of the year.

Carnival shares slid 4.7% after the cruise operator, whose business has been battered by the coronavirus pandemic, said it was delaying the relaunch of its AIDA cruises from Germany.

Among European equities, HSBC Holdings slid 2.9% in London. The bank's second-quarter profit fell 96% as the disruption caused by the pandemic complicated its efforts to refocus on Asia while dealing with the rising U.S.-China political tensions.

The ICE Dollar Index, which tracks the greenback against a basket of other major currencies, ticked up 0.3% while remaining near its lowest level in over two years. The dollar had made a sharp U-turn this summer following a long rally, and its slide added further support to the booming market rally, lifting U.S. stocks and commodities.

In bonds, the yield on the benchmark 10-year U.S. Treasury ticked up to 0.558%, from 0.536% Friday.

--Frances Yoon contributed to this article.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com and Anna Isaac at anna.isaac@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
ADT INC. -2.27% 8.17 Delayed Quote.3.03%
ALLIANZ SE -0.34% 163 Delayed Quote.-25.08%
ALPHABET INC. -0.03% 1465.6 Delayed Quote.9.42%
APPLE INC. 1.51% 115.81 Delayed Quote.57.75%
CARNIVAL CORPORATION & PLC 0.73% 15.18 Delayed Quote.-70.14%
DJ INDUSTRIAL 1.20% 27781.7 Delayed Quote.-2.65%
EURO / US DOLLAR (EUR/USD) 0.33% 1.17658 Delayed Quote.4.71%
HSBC HOLDINGS PLC 0.70% 303.65 Delayed Quote.-49.06%
LONDON BRENT OIL -1.19% 41.64 Delayed Quote.-38.18%
MARATHON PETROLEUM CORPORATION -0.31% 29.34 Delayed Quote.-51.30%
MICROSOFT CORPORATION 1.48% 210.33 Delayed Quote.31.43%
NASDAQ 100 0.84% 11418.062644 Delayed Quote.29.66%
NASDAQ COMP. 0.74% 11167.506924 Delayed Quote.24.46%
RIPLEY CORP S.A. -2.27% 215 End-of-day quote.-36.24%
S&P 500 0.83% 3363 Delayed Quote.3.24%
S&P/CITIC 300 INDEX 0.08% 3976.47 Delayed Quote.11.96%
S&P/CITIC 50 INDEX 0.08% 3942.44 Delayed Quote.5.50%
STOXX EUROPE 600 0.45% 362.65 Delayed Quote.-13.17%
STOXX EUROPE 600 NR 0.48% 797.4 Delayed Quote.-11.56%
WTI -1.21% 39.543 Delayed Quote.-34.77%
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